Adopt IFRS? Not in the best interest of the U.S., says this FEI member.

• Author: King, Alfred
• Position: Financial reporting - Financial Executives International

In the following, long-time FEI member Alfred M. King states his opinions on how adopting International Financial Reporting Standards might affect United States' businesses.

"We have the strongest financial reporting system in the world." "U. S. financial markets are the soundest in the world." "The U. S. is the last resort today for investors seeking safety." "The U. S. dollar is, de facto, the world's reserve currency."

These and many other similar sentiments have been expressed repeatedly in recent decades. The United States, on both an absolute and relative basis, seems to be doing pretty well.

But one other common adage also bears repeating here: "If it ain't broke, don't fix it!"

So what is busted, and what needs to be fixed? We submit that U.S. generally accepted accounting principles--U.S. GAAP--are not broken.

Still, pressure is building for the U. S. to relinquish GAAP and adopt International Financial Reporting Standards. The assumption seems to be that if we make such a move, even if it has only short-run pain (and out-of-pocket costs), we will all be better off in some sort of new World Order.

Didn't we hear that same song when the United Nations was founded? Consider if your assignment in class was to list six positive benefits that the UN has brought to the U.S. Many of us would have a hard time answering such a question.

Will Adoption of IFRS Help the U.S.?

Currently, there are two competing financial accounting systems, with each striving for preeminence. IFRS is used or about to be used in about 100 countries. GAAP is used primarily in the U.S. Proponents of the U. S. adoption of IFRS--those who want to give up GAAP--argue strenuously that we should act as a "good neighbor" and not try to go our own way. Rather, in a spirit of cooperation, the U. S. should simply "fold" (to use a term common in the poker-playing world) and let nature take its course by championing a one-world viewpoint.

The major accounting firms, and the American Institute of Certified Public Accountants are banging the drums for this approach, while the U.S. Securities and Exchange Commission appears to be having a hard time making up its collective mind one way or the other. Even the Financial Accounting Standards Board, which would be dramatically affected were GAAP to go away, seems in favor of IFRS over GAAP.

There is, however, another side to the debate, a side that has received relatively little press.

The 'Big Lie'

Financial executives are being...